Annual consumer price inflation came in at 1.9 percent in March, below forecasts for a 2 percent rise and below the BoE's target of 2 percent.

Data on Tuesday showed that British workers' pay is rising and outstripping inflation, and combined with the lowest unemployment rate in 44 years, has taken the edge off the uncertainty about Brexit.

The pound dipped slightly from around $1.3055 to $1.3040 after the inflation numbers were published. Against the euro, sterling extended its losses and hit the day's low of 86.81 pence, down 0.3 percent.

Economic data has failed to move the pound significantly in recent months as Brexit negotiations dominate the news agenda.

The BoE has signalled that it will lift interest rates to stop inflationary pressures from building, but it is highly unlikely to act until the Brexit process is resolved.

After the inflation data, ACLS Global analyst Marshall Gittler said the BoE would probably hold off on changing rates for quite some time "regardless of what happens with inflation."

European Union leaders last week granted Britain an up to six-month delay to Brexit.

"It seems very unlikely we will get a resolution on Brexit much before the 31 Oct deadline so what that means is more uncertainty and sterling doing very little in the meantime," said Justin Onuekwusi, fund manager at Legal & General Investment Management.

"Without an agreement or hard Brexit I can't see GBP doing much."

While implied volatility in the pound has fallen sharply as investors reduce their bets on the currency moving significantly one way or the another, Tuesday offered a reminder of the sensitivity to Brexit-related news.

A report in the Guardian newspaper that talks between the Labour opposition party and the ruling Conservative had stalled sent the pound tumbling. A spokesman for the Labour party denied that the talks had hit an impasse.